A Detailed Explanation Of How The BSA Misleads With Piracy Stats

from the and-on-and-on-it-goes dept

A couple months ago, when the Business Software Alliance (BSA) released its latest stats on "piracy," it's VP of anti-piracy, Neil MacBride, gave me a call to discuss my earlier complaints about the organizations methodology. Needless to say, we did not see eye-to-eye, and the phone call did little to resolve our differences. I'm still hopeful that eventually the BSA will recognize that it's doing more damage to its own position by publishing obviously bogus numbers. So, with the organization releasing another bogus stat today, it's time to explain why it's wrong and misleading.

Today's report is an attempt to get the government involved in protecting BSA member companies' business model, by claiming that the US is losing out on $1.7 billion in tax revenue due to "pirated" software. And, of course, it comes with a lovely quote from Mr. MacBride: "The most tragic aspect is that the lost revenues to tech companies and local governments could be supporting thousands of good jobs and much-needed social services in our communities." And the BSA is even so kind as to quantify what that (not really) lost tax revenue could do: "For example, the lost tax revenues to state and local governments -- an estimated $1.7 billion -- would have been enough to build 100 middle schools or 10,831 affordable housing units; hire 24,395 experienced police officers; or purchase 6,335 propane-powered transit buses to reduce greenhouse gas emissions."

Except that this is almost entirely incorrect and it's relatively easy to show why:

The report counts every unauthorized piece of software as a lost sale. You have to dig through separate PDFs to find this info, but when you finally get to the methodology it states:

The software losses are based on the piracy rate and equal the value of software installed not paid for.

That's a huge, and obviously incorrect assumption. Many of the folks using the software likely would not have paid for it otherwise, or would have used cheaper or open source options instead.

The report makes no effort to count the positive impact of unauthorized use of software in leading to future software sales. This is something that even Microsoft has admitted has helped the company grow over time. But according to the BSA's report, this doesn't matter.

The report also proudly notes: "Software piracy also has ripple effects in local communities." However, "ripple effects" are easily disproved as double or triple counting the same dollar. Using ripple effects like that inflates the final number by two or three times. In the link here, Tim Lee explains this (in reference to an MPAA study done by IPI, but it applies here to the BSA study done by IDC as well):

If a foreigner gives me $1, and I turn around and buy an apple from you for a dollar, and then you turn around and buy an orange from another friend for a dollar, we haven't thereby increased our national wealth by $3. At the beginning of the sequence, we have an apple and an orange. At the end, we have an apple, an orange, and a dollar. Difference: one dollar. No matter how many times that dollar changes hands, there's still only one dollar that wasn't there before.

Yet in IPI-land, when a movie studio makes $10 selling a DVD to a Canadian, and then gives $7 to the company that manufactured the DVD and $2 to the guy who shipped it to Canada, society has benefited by $10+$7+$2=$19. Yet some simple math shows that this is nonsense: the studio is $1 richer, the trucker is $2, and the manufacturer is $7. Shockingly enough, that adds up to $10. What each participant cares about is his profits, not his revenues.

This is a huge fallacy that the BSA an IDC refuse to acknowledge. When I discussed it with them in May, they insisted that they only wanted to talk about piracy rates, not the loss number. I wonder why...

Next, if they're going to count ripple effects in one direction, it's only fair to also count them in the other direction. That is, they complain that:

Lost revenue to technology companies also puts a strain on their ability to invest in new jobs and new technologies. For example, the $11.4 billion in piracy losses to software vendors and service providers in the eight states would have been enough to fund more than 54,000 tech industry jobs.

But what they don't acknowledge is the ripple effects in the other direction. That is, if (going by their assumption, remember) every company that uses an unauthorized copy of software had to pay for it, that would represent $11.4 billion in money that all of those other companies could not use to fund jobs at those companies. What about all of those jobs?

The BSA/IDC stat on lost tax revenue also miscounts on the point above, since it includes the lost income tax revenue from those 54,000 lost jobs, but does not count the equivalent income tax revenue from those other jobs. In fact, in the fine print, the report notes:

"Employment losses are calculated from revenue losses, and only apply to employment in the IT industry, not IT professionals in end-user organizations. Tax revenue losses are calculated from revenue losses (VAT and corporate income tax) and employment losses (income and social taxes)."

In other words, the income tax losses only count one side of the equation and totally ignore the lost income tax revenue from the lost jobs on the other side of the equation. Oops.

It seems likely that the eventual tax benefits of the unauthorized use of software is most likely to greatly outweigh the lost tax revenue elsewhere. That's because the use of software within industries is a productivity tool that increases overall productivity and output, which would increase taxes beyond just the income taxes of the employees. The study, of course, ignores this point.

Worst of all, the report seems to assume that direct software sales are the only business model for the software industry, ignoring plenty of evidence from companies that have adopted business models that embrace free software -- generating billions of dollars for the economy (and in taxes). And that's what this really comes down to. It's a business model issue. If others started adopting these business models as well, there wouldn't be any "losses" at all.

Oh, and just for good measure, the report also falsely claims that: "What many don't realize or don't think about is that when you purchase software, you are actually purchasing a license to use it, not the actual software." That's not exactly true and goes directly against a recent court ruling that said the opposite and goes through a detailed explanation for why a piece of sold software is a sale with restrictions, rather than a license, using previous court precedents.

Most of these points have been made to the BSA and IDC in the past, and both organizations chose not to address them. The fact that they're continuing to use these obviously false numbers and methodology to now push for the government to prop up an obsolete business model should be seen as troubling not just for the dishonesty of it, but for the negative impact it will have on the software industry and our economy as a whole.

Reader Comments

BSA Misleading Stats

Apropos of your analysis: Many years ago I was at a conference on the problem of software piracy in Hong Kong. The HK Customs and Excise Dept (the agency responsible for stopping software piracy) had a reception at their offices. A BSA member noted that virtually everyone in the office was using pirated software on their computers. One of the Dept heads acknowledged as such, but noted that "If we had to pay the inflated prices your companies charge for legal copies, we wouldn't be able to pay the salaries of the officers who conduct the software piracy raids that your companies request."

First, good article. You're definitely right about a potential negative effect on our economy you allude to in the end. I'm not sure I can justify it in the same was as you but it's clearly regression and society doesn't like that, since business relies on society that can't be good.

Second, what else are you doing to counter-act the BSA in their plea to the government? It's obvious that your article is so long that the only people in office that will read it are adviser, who will paraphrase it potentially modifying your general argument you're making. They would either intentionally weaken it because they disagree with you or leave out key points that would get someone on their feet even if the adviser thought it was something easily overlooked.

Third, who is this BSA to calculate what I do with my bandwidth? I'm unpredictable, unresolvable, and unreliable. Maybe I pirate stuff and delete it just to tease these silly organizations and create chaos in the sticks-up-our-asses department.

"Oh, and just for good measure, the report also falsely claims that: "What many don't realize or don't think about is that when you purchase software, you are actually purchasing a license to use it, not the actual software." That's not exactly true and goes directly against a recent court ruling that said the opposite and goes through a detailed explanation for why a piece of sold software is a sale with restrictions, rather than a license, using previous court precedents."

This is so grossly misleading that I am very much surprised you chose to include it in to your article. It would certainly have helped to mention that this was a trial court decision, and that its hands were tied based upon how the 9th Circuit has defined what precedence must be used when a conflict exists between various panels of the appellate court. Even the district court noted that under more recent precedent the license/sale issues were resolved in favor of the software company, but that circuit rules required that in the event of such conflicts the earliest decision had to be used...and that was a 1977 decision versus the three appellate decisions holding precisely the opposite, which decisions are much more recent (not to mention that the copyright law currently existing in the US entered into effect on 1/1/1978). Perhaps in the near future the 9th Circuit sitting en banc will be called upon to address the conflict, and based upon the more recent appellate decisions in this and other Circuit Courts of Appeal, coupled with the change in copyright law in 1978, the outcome of any such decision is by no means free from doubt.

As for BSA's "rack up" of the numbers and your comments concening the assumptions made, I personally would like to know what analytical method you would use to arrive at what you believe is a more credible number.

And, as much as it will stand the hairs on the back of your neck on end, all the economic analysis in the world you may proffer still does not in the slightest excuse "stealing" (your word...not mine. See: your comment yesterday that extending copyright duration is "stealing" from the public , a "right" in the public that is not expressed in law except perhaps by implication). All laws have a moral dimension, and in the case of "piracy" clearly the moral dimension has been lost on many in a generation that places a higher value on "I want it now", rather than paying up like those who abide by our laws.

One final observation. You chastize those persons/companies who engage in the business of developing and distributing software, calling the business models they use what I term the equivalent of "old school". Economic rationalization, academic studies, economic theories aside, it is in my view presumptuous of you to constantly harp that they need to see the light and give away their workproduct so that they can make it up (and possibly more) providing "scarce" goods and/or services. The simple fact is that not every business fits neatly into the economic mold you openly advocate. Yes, your models can and do work quite well for many businesses, but to generalize it as you do seems to me off the mark. Instead of saying such business have not adapted to the times, perhaps you may wish to consider offering them alternatives directed to their specific circumstances.

Re:

And, as much as it will stand the hairs on the back of your neck on end, all the economic analysis in the world you may proffer still does not in the slightest excuse "stealing" (your word...not mine. See: your comment yesterday that extending copyright duration is "stealing" from the public , a "right" in the public that is not expressed in law except perhaps by implication).

Nonsense. Post-hoc copyright extension is stealing because it is taking something that all participants agreed should become public domain (the freely available property of the public at large) and depriving that owner of its use. Making property unavailable to the owner is by definition, theft. Copyright infringement does not deprive the copyright owner of the use of his property, and thus is not theft.

Re: Theft

No, it doesn't deprive the owner of his rights, so in that respect it isn't theft. It is, more closely, breaking and entering. If I pick the lock to the local Pizza Place to use their kitchen to make me a snack, I've broken in and used their stuff (even if I don't take their food).
By the same token, if I use someone's software without paying, I've broken in and used their stuff unlawfully.

Re: Re: Theft

No, it doesn't deprive the owner of his rights, so in that respect it isn't theft. It is, more closely, breaking and entering. If I pick the lock to the local Pizza Place to use their kitchen to make me a snack, I've broken in and used their stuff (even if I don't take their food).
By the same token, if I use someone's software without paying, I've broken in and used their stuff unlawfully.

You are joking right? It would be more like a friend borrowing the use of the pizza places oven, and the oven vendor suing them for not buying their own oven. What you are using as an example implies the software is installed on a system and someone has trespassed into said system to use the software.

Re:

"All laws have a moral dimension"

So does lying, but that doesn't seem to stop lots of industry associations from making over-the-top claims.

You rail against "many in a generation" for lacking moral fiber; we rail against many in the business world for lacking moral fiber. That doesn't imply that only one side is lacking, just that we're only talking about the one side in that particular discussion.

"it is in my view presumptuous of you to constantly harp that they need to see the light and give away their workproduct"

Can you point out the quote in this article where Mr. Masnick makes such a statement? I can't seem to find it. Or is this a non sequitur?

"The simple fact is that not every business fits neatly into the economic mold you openly advocate"

That doesn't necessarily invalidate the mold.

"Instead of saying such business have not adapted to the times, perhaps you may wish to consider offering them alternatives directed to their specific circumstances."

As far as I'm aware, Mr. Masnick hasn't signed up to write whatever it is you demand of him.

Moreover, particularly in the software business, it doesn't take much investigating to see models both new (commercial open source, software as a service) and old (custom software development) for making money without having to fight piracy.

Re: Re:

This was meant to refer to a recurring theme presented in this and numerous other articles appearing on this site.

"give away workproduct"

A general reference to views expressed concerning businesses dealing with digital goods.

"doesn't necessarily invalidate the mold"

Correct, as was noted.

"demand of him"

Stating "Perhaps you may wish to consider" does not strike me as a demand.

"software business...models both new...and old"

Providing software for free is easy when a company receives income from other sources (ads, rendering services, etc.). Writing code on a custom basis is easy if a company is basically a software botique. The more difficult issue is when none of these arrangements "fit". To say it is an obsolete business model does not do much to enlighten others on what it is that might work.

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Having worked withing the aerospace and defense industry, the cost of prototyping (such as Boeing's 777) is so high that high end proprietary software is mandatory to design and develop certain products within budgetary constraints. In the case of Boeing and other aerospace/defense contractors open source simply does not cut it because of the clear need for tight configuration control.

In the case of the 777 it has been reported (though accurate figures are not publicly known) that Boeing invested approximately $1B to develop the necessary software tools. Over time many of these tools have been replaced with proprietary software tools due to enhanced functionaly for design and virtual prototyping. Whether or not such software is developed in-house or otherwise, tight configuration control is an absolute must.

Designing an ordinary consumer article using open source is one thing, but designing a highly complex system is quite another...be it a commercial of military aircraft, military weapons systems, structures such as bridges, large buildings, etc. To my knowledge there are no viable open source options for systems such as these.

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Actually, some of such in-house software is spun out to other commercial entities for further development and refinement. I may be wrong, but I seem to recall that NASTRAN is one such case. I know there are many others, but I will be darn if I can remember their names.

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Apple, meet orange.

Bespoke in-house software is a special point that's irrelevant to anything we're talking about in this article. Do you have any examples of a proprietary commercial product that's more configurable than the open source equivalent?

It's also interesting that you specifically mention Boeing since they were heaving involved in creating the ODF document standard that's become standard in almost all office programs. Except Microsoft's, of course, since they're still trying to push OOXML so that they can continue to lock people into MS Office...

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I chuckle whenever I hear of references to prototyping in the aerospace industry. Makes me think to the Catia snafu as it relates with Airbus.

Your right though. However, no product be it open source or proprietary can replace good communications within the product development team. In the case of Airbus, Airbus France decided to use aluminum wiring requiring larger wiring harnesses while Airbus Germany used copper wiring when developing the A380. Because aluminum is less efficient at transferring current, larger wiring harnesses and cable ducts which were not compensated for with the multiple fuselage pieces.

Point is, the software is only as good as it's programmer. In highly regulated industries such as aerospace, it should be assumed (hopefully) that most software isn't COTS!

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In the case of Boeing and other aerospace/defense contractors open source simply does not cut it because of the clear need for tight configuration control.

Not true. I'm a design engineer who has worked in "the aerospace and defense industry" and I can say that MLS seems to have no idea what he is talking about. There is absolutely no reason that "configuration control" cannot exercised with open source software. In fact, it is can even be easier due to the licensing problems often associated with other software that attempts to take control away from the user. Now, there may not be open source software available with the needed functionality for some purpose, but that is a different issue and has nothing to do with any kind of configuration control.

Re: Configuration Control

MLS wrote:

...open source simply does not cut it because of the clear need for tight configuration control.

Actually, the most advanced configuration-control software available nowadays is all open-source. From source-code management tools like Subversion and Git (imagine trying to coordinate the ongoing development of the Linux kernel among thousands of contributors), to automated rollouts of custom Linux installations on thousands of cluster nodes--you'll find that the cutting-edge stuff is all to be found in the open-source world.

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You may be surprised. The applications may be proprietary today, but open-source counterparts are usually in the works. For example, Blender has replaced much of the proprietary software previously used for rendering 3D CGI movies, most of the world's top 500 supercomputers use Linux, OpenFoam is coming along nicely as a fluid-dynamics package, etc. Don't expect open-source to out-perform every app created since 1985 all at once. Just acknowledge that when open-source does outperform (or provide all necessary functionality at greatly reduced prices).

I work with cad design software for the automotive trade. There are only a few vendors in the space - all vertical, niche markets. These are the last markets that open-source has issues with as the very few companies producing this niche software either steadfastly refuse to write for anything other than Windows (giving rise and incentive to open-source alternatives) or are working on a Linux port, but clearly don't understand the Linux technical environment.

Re:

Heh, you again. Does it tire you to shill for these companies? Anyway, speaking for myself personally:

"The simple fact is that not every business fits neatly into the economic mold you openly advocate."

This is an even weaker argument than when you try to use it for the music industry. At home and at work, where possible, I use open source software. I've never paid for a Linux distribution myself but my company pays for close to 100 licences. I use Openoffice, MySQL, PHP, Amarok, GMail, Picasa, VLC, K3b, Inkscape, etc. None of these programs have ever been paid for, yet the developers keep working on them.

My reason for doing this isn't simply price, but the fact that I carefully avoid the risks of viruses, spyware, rootkits, vendor lockin and forced upgrades that plague the products of companies like Microsoft. If these people are losing money, they need to stop assuming it's piracy that's the problem. If the BSA spent as much time educating companies on better ways to do business as they do inventing figures and lobbying, the industry would be in much better shape.

10 years ago, I used mainly paid-for proprietary software. Now, I use almost none. The reason why isn't "piracy".

Re: Re:

I do not "shill" for anyone. Moreover, I do not recall ever having discussed this issue re the music industry other than to note that there is a moral dimension when one chooses to wilfully violate our laws (no matter how much one may feel provoked by some of the "dunderheads" within the music industry).

Open source is a nice idea and produces quite useful product. I, however, prefer proprietary product when matters such as configuration control, a predictable schedule of updates, etc. are an important concern.

Morality is a lot more complex than that

To violate a law does not equal an immoral action. It may not be the most wise course of action, but it doesn't mean it is wrong.

If the law is itself wrong, there are many ways one could protest.

For many "pirates", it is an act of civil disobedience. For others, it mean inverting the law of copyright into copyleft. While others vote with their dollars. Still others vote in political elections.

Sometime, people just wish to subjugate us. For example, if the law allow a few farmer to have a monopoly on a market, and yet a farmer blackmarket thrives. The majority of people then shop in the blackmarket because it is cheaper. The illegal farmers were simply satisfying a demand, a need so to speak. These law-breaking consumers found more values in sloping in the illegal black market. Are they in the wrong because they broke the law? Of course not.

Some argued that pirates were not in the wrong, and that monopolists are. I agree.

The market, not the government, are the arbiter of what is right and wrong and they reward accordingly. For example, techdirt is awarded for honesty while plagiarizers of techdirt. are rewarded with...no traffic and a lot of cursing.

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"Open source is a nice idea and produces quite useful product. I, however, prefer proprietary product when matters such as configuration control, a predictable schedule of updates, etc. are an important concern."

I will presume that a predictable schedule doesn't include the unpredictable years it took to upgrade XP to Vista. Nor are you clear about configuration control where I've faced more problems with proprietary software than I ever have with open source, even on Windows.

The reality is that, like many others, you prefer what you "know". More to the point what you think you know.

Your many comments on this and other posts here do appear to have a "shill" factor to them, none the less.

Less, perhaps, shilling for any particular company or organization than for your rather peculiar view of "morality".

What I mean by that is your defense of laws which change short term monopolies in exchange for creation of a product (patents) or "content" (copyright) and extending them beyond their original intention and economic value.

I will point out that there is little or no "morality" involved in the extention of copyright for "publishers" purely to freeze something for commercial gain of the "publisher" which goes against the whole idea of copyright when it became a legal tool in England with "Queen Anne's Act" which was put in place expressly to protect content creators from "publishers" be it Disney or anyone else. An idea and rationale carried on in the US Constitution.

Even less when you consider that all extentions to copyright have occured not because creators asked for them but because "publishers" did.

The same dynamic has been at work over the creation of new patent classes, a lessening of patentablity requirements, the silly idea that by changing something neither important to nor central to the device/invention patented. For example changing an inert compound in a pharmaceutical that somehow makes it all patentable all over again.

Morality? Please point out the morality in that.

Nor is there a whiff of morality in trying to, and sometimes succeeding in, criminalizing what is, in the end, a commercial transaction between buyer and seller.

Your narrow view of morality is that what is moral is to follow a law, no matter how asinine that law may be.

Laws in a free society, like so many other things, can only exist within the consent of the governed no matter what a legislature may do or say. In fact, that's how civil law evolves. To a large extent it's how criminal law evolves. Though consent is a far more vital component of civil law.

A populace that withdraws respect for concepts like copyright and patents is the final and only moral arbiter, particularly in civil law.

That respect for those concepts is dependent on them being what they originally intended and not distorted beyond recognition for the sole use and abuse of large software publishers, music distributors (which is what record companies are), motion picture publishers, drug manufacturers and so on.

Once the public value of these concepts and the monopolies they grant becomes less than zero due to distortion then I'd say the consent of the governed has been withdrawn.

A final point on morality, there is nothing at all moral in economics or trade with a monopoly no matter how briefly is may exist. Monopolies are simply immoral.

Your defence of them while playing the morality card over and over again either indicates a strange view of morality or a blind adherence to law, particularly civil law, as being somehow based on morality rather than what it really does which is regulate such things as trade and commerce.

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"I, however, prefer proprietary product when matters such as configuration control, a predictable schedule of updates, etc. are an important concern."

Wow, you're kidding me! I've yet to find any proprietary product that gives as much complete control as an open source product *especially* when dealing with update and configuration control. For instance, Microsoft forces through particular security updates, even if you have automatic updates turned off or have disabled the update in WSUS. No such thing in Linux.

Why is a "predictable schedule of updates" more important than having a patch cover a security holes ASAP? You don't *have* to install an update as soon as it's released. Surely it's better to have the update ready and waiting when you're ready to perform your scheduled update than have a gaping security hole because it's not the vendor's update time yet.

Configurability? Surely you're not claiming that, for instance, IIS is more configurable than Apache?

Re:

All laws have a moral dimension, and in the case of "piracy" clearly the moral dimension has been lost on many in a generation that places a higher value on "I want it now", rather than paying up like those who abide by our laws.

and what of the moral dimension? What will you or anyone else do about it? Its a fact that most people will choose to "steal" a piece of software if they can get away with it. Oh well. What now? Send a priest out to fill souls with guilt? Thats about the extent that you can act upon it. DRM doesn't work and only serves to piss off the ones who did buy it and using the US court system as a revenue stream will end at some point. Meanwhile, if their zeal to make sure they're compensated, companies lobby to twist laws that ignore basic rights of the public of IP law to protect a few who simply can't fathom any other way to profit.

At some point these companies need to accept what is rather than trying to protect what cannot be protected.

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Fair use is not a "right" conferred by law on the public. It is a limitation on the statutory rights of a copyright holder. It may sound to you as if I am wordsmithing, but that is hardly the case under the law of copyrights.

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Actually, the doctrine of a right of fair use has existed in common law and case law for a long time and Congress eventually even restated it in statutory law. The portion of the law that doesn't seem to exist in MLS's version of the world is the Copyright Act of 1976, 17 U.S.C. § 107, which reads, in part:

"Notwithstanding the provisions of sections and , the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include:

1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors."

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Perhaps if you read 106 and the rights afforded under copyright to authors, you would then understand that 107 et. seq. represent limitations and exclusions to the rights granted in 106. They do not grant legal rights to the public at large.

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Perhaps if you read 106 and the rights afforded under copyright to authors, you would then understand that 107 et. seq. represent limitations and exclusions to the rights granted in 106. They do not grant legal rights to the public at large.

I'm content to let people read it for themselves and draw their own conclusions as to the veracity of your clams and the quality of your character.

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Let me give you an example that might help you understand the point I have made. As a general rule, federal copyright law precludes states from enacting copyright-like laws that for all intents and purposes duplicate federal copyright law. This is known as "federal preemption", and is stated in Section 301(a) of the Copyright Act. However, and as will be apparent after taking a look at 301(b), the Copyright Act expressly acknowledges that states do retain the right to legislate to varying degrees in matters involving works of authorship (We are, after all, a nation with 51 sovereign governments...the states and the feds).

A situation may arise where under federal law a copyright owner is out of luck because a work is deemed to be in the public domain. This does not, however, end all legal analysis because in some instances it must be determined whether or not state law may come into play and foreclose or limit the use of a work deemed to be in the public domain under the federal scheme.

This is not an issue that arises with alarming regularity, but if there is one thing I have learned from practicing law it is that anything is possible.

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MLS: "one thing I have learned from practicing law it is that" ... you know nothing about corporate, government contract, and high-tech computing needs? You've several times argued points in this thread that are totally asinine.

Open source solutions offer infinite configurability (get code -> go change it), the fastest possible update and security patch availability (email the code maintainer yourself), peer-review structures to prevent or rapidly identify bugs, and freedom from vendor lock-in. None of this has anything to do with why proprietary software is still heavily used by major corporations, and it more often than not has nothing to do with software quality (the buggiest code ever written existed in early MS Office).

What drives government contractors and corporations to use proprietary software so often then? What drives it is guaranteed support AND liability for software performance failure. The ability for a company to place trust in its own limited IT to be able to configure software (deliberately limited configuration options so they don't screw it up), to deploy it to a workforce that will have adequate available training (so its useful to them), and somewhere to point the finger when its broken to get it fixed.

The very weakest segment of the open source community today is the availability of quality documentation and training. Software quality, configurability, security, and update availability are certainly not the weak areas.

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Merely FYI, my time spent within corporate practice was with Martin Marietta, and later Lockheed Martin after the Martin Marietta/Lockheed merger. Unlike most involved in corporate practice whose pre-law background had nothing to do with technology, mine was heavily involved in technology and associated business issues...including a very heavy dose pertaining to software acquisition, development, deployment, third party transfer, etc.

In almost every instance the software itself was under tight configuration control imposed by the DOD. Once a baseline was established by the contractor, the DOD was absolutely insistent that no changes to the baseline would be tolerated by the DOD without following a long and demanding, paperwork intensive, protocol...at times measured in months/years. As frustrating as this was, there was a measure of validity to the DOD madness. It wanted as much as possible to ensure replicability from each phase of a program to the next. Some programs that readily come to mind where this was a clear mandate were Hellfire I and II, Patriot, Lantirn, TADS/PNVS, Sniper, Longbow, etc.

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Oh brother, another lawyer who thinks he's an engineer. I can't count the number of things I've seen screwed up by those.

Claims that configuration control requires proprietary software are completely false. As mentioned above, the licensing involved with proprietary software can make configuration control very difficult. It is absolutely true that it is important to be able to replicate and verify all the steps in the design process. The problem comes when proprietary software with restrictive licensing and proprietary file formats are used. Now there are many reasons that the calculations and files may need to be accessed in the future.

For example, suppose that there is a structural failure someday with a fighter jet and the design files are needed to be analyzed. But the original computers used are no longer available and the proprietary software vendor has decided to quit licensing the old version you used for installation of new hardware. Or if the vendor is no longer in business. You're screwed.

Other examples include support, improvement programs, sales to foreign countries and so on. These are all things that can be blocked by proprietary software licensing. In an effort to avoid these problems a great deal of time and money is often spent by the legal department trying to negotiate "special" licenses. The lawyers make lots of money in the process and so I can see how MLS, as a lawyer, would love that. These problems don't occur with open source software and I can also see how MLS would hate that. But that's what happens when you let the lawyers run the show.

I'm a real engineer from General Dynamics and I can't imagine that the world is that much different over at Martin Marietta.

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re:

Remember, the aircraft segment of GD was folded into Lockheed Martin many years ago (or at least that is my recollection...the unit in Ft. Worth).

Just a couple of notes that may be relevant. All defense products are documented in TDPs, manufacturing equipment is retained by the DOD (as a general rule the DOD retains ownership of such equipment and "rents" it to the aircraft manufacturer), software is required to be retained, repair procedures, both at the flight line and manufacture depot levels are documented and retained (typically in both printed and digital copy), etc. I can recall only one instance where important information associated with the manufacture of an aircraft was not in the DOD archives. Of course, full copies were retained by the manufacturer.

Proprietary software licenses have never in my experience imposed any limitations. COTS licenses are occasionally accepted, but in each case provisions were made to cover the possibility of the COTS licensor going belly up. Non-COTS is licensed with "Restricted Rights", once again imposing no impediment to the use of software by either the DOD or its contractors (not to mention the provisions of 28 USC 1498(b)).

During my many years at MM, and later LMC, not once did software, whether proprietary to a subcontractor or non-COTS, create any problems demanding large amounts of my time. Most were handled in minutes, and not once did I ever have to sit down with another attorney and engage in licensing negotiations. In fact, only once did I ever have to negotiate a complex license arrangement, and that was limited to my facility serving as a beta site for what later was released by MS as Office 2000. BTW, I threw in, and MS accepted, a provision that once the software was released everyone at the facility who wanted a copy could get the full suite for cost...$20. It made for many happy campers.

I will agree that most lawyers involved in R&D and Production contracts have not the slightest clue what the products comprise or how to spell technology. In my case this was never an issue since my pre-law background embraced military aviation and undergraduate/graduate degrees in aero engineering.

A final point. I am not one inclined to sit at a desk and wait for people to come to me. In fact, it is rare to even sit at my desk. My time was spent in the labs, with designers, structural engineers, EEs, all other technical groups, program managers, product support engineers and technicians, and every other function involved in each program. In my view how can one expect to really be helpful if one hasn't a clue what they are dealing with and the associated business plan for domestic and international sales?

BTW, in the programs I dealt with open source was RARE, primarily because of the import of our Export Control Laws specified in the ITAR.

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re:

"BTW, in the programs I dealt with open source was RARE, primarily because of the import of our Export Control Laws specified in the ITAR."

So, you admit, you have no idea what you're talking about in that area. Remember, we're not talking about specialised embedded systems here, we're talking about desktop office software. Do you have any ideas that don't involved harking back to a different industry? It's like talking to a Formula 1 engineer about the best fuel to use in your Pinto - they may be an expert in their field but they won't necessarily know what they're talking about in answer to your query.

Re:

As for BSA's "rack up" of the numbers and your comments concening the assumptions made, I personally would like to know what analytical method you would use to arrive at what you believe is a more credible number.

I would think it's rather obvious from the critiques. If you're going to count the impact in one direction, you should also count the impact in the other direction as well. And, you should be barred from double and triple counting the way the BSA does.

And, as much as it will stand the hairs on the back of your neck on end, all the economic analysis in the world you may proffer still does not in the slightest excuse "stealing"

I'm not "excusing" anything. I'm pointing out that these stats aren't even close to accurate, but are used by politicians in passing laws. Do you not think that's immoral? Publishing obviously bogus statistics in an effort to get the laws passed in your favor?

your word...not mine. See: your comment yesterday that extending copyright duration is "stealing" from the public , a "right" in the public that is not expressed in law except perhaps by implication

No, my use then was proper. In that case, something *was* being taken away: the content is being removed from the public domain to which it was promised. So there is a real loss there.

All laws have a moral dimension, and in the case of "piracy" clearly the moral dimension has been lost on many in a generation that places a higher value on "I want it now", rather than paying up like those who abide by our laws.

I'm sorry, but this statement is ridiculous. The *moral* dimension here is that bogus stats are being used to pass laws that harm the public. And your response is that that's okay because it's the law and that's moral?

Yikes. I've discussed morals with you before, and I think you really may want to revisit yours. Repeatedly, you've shown that you believe immoral things, such as lying to get favorable laws passed, is somehow more moral than creating an economic environment where creators benefit.

Economic rationalization, academic studies, economic theories aside, it is in my view presumptuous of you to constantly harp that they need to see the light and give away their workproduct so that they can make it up (and possibly more) providing "scarce" goods and/or services.

Um. Why should we throw the economic explanation for how they can do better aside? That's the whole point.

The simple fact is that not every business fits neatly into the economic mold you openly advocate.

No one has yet shown one where it wouldn't work. Unless you're saying that there's some industry that ignores the fundamental rules of economics. I've yet to see one.

Yes, your models can and do work quite well for many businesses, but to generalize it as you do seems to me off the mark.

It's not "generalizing." It's applying fundamental economics to their situation. It's the opposite of generalizing.

Instead of saying such business have not adapted to the times, perhaps you may wish to consider offering them alternatives directed to their specific circumstances.

That's what we do here all the time. And rather than recognizing that fact, you instead claim that the alternatives we provide are somehow immoral, even if they help everyone be better off.

Re: Re:

No, my use then was proper. In that case, something *was* being taken away: the content is being removed from the public domain to which it was promised. So there is a real loss there.

Hold on, Mike, I need clarification. So when copyright expires, its supposed to be property of the people... as in public domain? Is Mickey Mouse is supposed to be public domain but because of Bono Copyright act, it's not?

Re: Re: Re:

Yes. Mickey Mouse would still be covered by trademark law, but early cartoons such as Steamboat Willie would now be public domain if the Bono act wasn't passed.

That's the problem for many people - OK, maybe Disney can continue to make profit but what about the others? Disney was certainly not the only person making animated shorts at that time, and we risk losing access to those other artworks because they're now orphaned works. That is, nobody knows who owns the copyright, so they can't be legally released and therefore there's no commercial incentive to restore them.

Re: Re:

My comment re "rack up" of course reflects that BSA numbers are clearly overstated because the methods used to arrive at such numbers are not sound. All I really wish for is someone taking their numbers, vetting them using methods that are sound, and then offering up a number that is believed to be a more accurate reflection of the financials. I see critiques, but not a counterpoint argument, so it is difficult to know by what amount the numbers are overstated.

Re:

Its a fool's argument that every stolen piece of software is a lost sale. It's not.

I can't tell you how many times I've plunked down money for a piece of software and the software was 1) full of bugs, 2) needed multiple patches to get the thing to work on my o/s, 3) had to upgrade it five or six times to get the features that I was misled into thinking was offered but just didn't exist, 4) didn't function as described in the advertising/box/package 5) was so crippled because of copy restrictions that I couldn't use it to perform the tasks it was supposed to perform, 6) poorly written, badly designed, horrible user interface or 7) just plain old crap.

To get around this, I go to the manufacturer's site and get a trial copy. Only when those are not available, I have resorted to downloading a copy and use it to see if its suitable for my purpose. Nine out of 10 times, I erase the software from my computer for the reasons listed above. For the 1 of 10, I buy the software.

The analogy to the BMW is not even in the same universe. The BMW dealership WILL let me always take a test ride. I can RENT the BMW an try it for a week. A BMW is not so horribly crippled by anti-theft technology that I can't drive it after I paid for it. BMW has to compete against myriad other manufacturers producing the same basic product that there is true price competition ensuring that I can get a fully functional car at the best available price and it is MY choice to spend more to get a brand name, or luxury features if I CHOOSE -- but not so with software. Until the software industry starts to better serve its customers, I have no sympathy for them.

Re:

You chastize those persons/companies who engage in the business of developing and distributing software, calling the business models they use what I term the equivalent of "old school". Economic rationalization, academic studies, economic theories aside, it is in my view presumptuous of you to constantly harp that they need to see the light and give away their workproduct so that they can make it up (and possibly more) providing "scarce" goods and/or services. The simple fact is that not every business fits neatly into the economic mold you openly advocate. Yes, your models can and do work quite well for many businesses, but to generalize it as you do seems to me off the mark. Instead of saying such business have not adapted to the times, perhaps you may wish to consider offering them alternatives directed to their specific circumstances.

hell yeah, one size does not fit all, that's why everyone should go back to selling plastic discs in shrinkwrap.

Re: I keep getting confused.

Restrictions?

A sales of software is a "sale with restrictions"? On what legal basis does this arise? Certainly not copyright law, which gives a copyright holder a legal privilege of restricting distribution, but does not grant any privilege of restricting the *use* of a copyrighted work. In other words, Picasso can limit distribution of his paintings but he cannot legally force me not to buy one and then, say, paint a moustache onto it. (Distributing the result, an unauthorized derivative work, might be verboten though.)

At least, he can't unless AS A CONDITION OF THE SALE he makes me sign something to that effect, and only hands over the painting to me and accepts my money AFTER I've ticked the little box marked "I, the undersigned, do hereby promise not to paint a moustache onto the painting" and sign on the dotted line.

Under no legal theory that I'm aware of does a software vendor magically develop an ability to use the law to enforce such restrictions that Picasso does not have. In fact, Title 17 Section 117(a)(1) of the US Code clearly establishes that the copies made during normal installation and use of software explicitly don't require prior permission of the copyright holder to make, i.e. cannot be infringing, so the fact that software (often) has to be copied onto a hard drive and (always) has to be temporarily copied to RAM during use does NOT make it different from Picasso's paintings in this regard.

Zip, Zero, Nada for Moral Campaign against "Piracy"

The fact that they're focusing on wasting money fighting piracy means that RedHat and other companies can roll over their collective asses a lot easier.

The fact that they're trying to prop up old business models mean nothing. The free software community will just walk all over them and show the consumers better alternative at far cheaper price and continue to profit.

Fighting "piracy" mean ditty squat if at the end of the day someone decided that "piracy" isn't the problem and that the business model is.

How will it all end?

The BSA keeps telling the same lies again and again. Clearly, as long as the organization exists, given their mandate, they have no choice. Does their leadership even believe their own lies any more? This makes me wonder what will happen to the BSA and similar organizations. I can't imagine circumstances in which the BSA starts telling the truth and somehow manages to stay in business. These people are fighting for their jobs. Hence their apparent irrationality.

Re: How will it all end?

Because monopolies allowed extremely incompetent people to stay in business. There is no reason that monopolies inherently encourage more incompetent CEOs, but it does not root out incompetents ones.

Stupid companies are the laughingstock for the rest of industry...but when entire industries are run by incompetent people...it become a social/economic catastrophe.

Now, we're going to enter the market correction stage as FOSS competitors begin to solidify their invasion of the marketplace. The price will be reset to the optimal price range and innovation will increase, but not without a lot of pain and suffering for those that refuse to adapt.

a counterpoint

I grabbed a torrent of OSX back in January after being pissed off at Vista, and not really wanting to upgrade to a "more familiar XP experience"

One of the telltale signs of well optimized code: The hard drive actually went to sleep, something I hadn't heard in YEARS. Anyways, I was so impressed with the software. I decided to get a mac a few weeks later. I decided to kill off my entire Microsoft ecosystem.

Point is, if I wouldn't have enjoyed monkeying around with the OS on a more intimate level than what I could get in a store, Apple wouldn't have converted me and gotten over $4200 of my cash.

"Hey, I heard you've started a currency exchange business!"
"Indeed!"
"What's your business model?"
"Oh, when a client comes and gives me $1, I exchange it for $1.50"
"But.... how do you make profit?"
"Profit?! I dunno the 'profit' you're talking about, but my revenues are absolutely skyrocketing!!!"

At $400 retail MS Office 2007 Pro is way too high for the average home user to consider. I wonder how many sales they would make if they sold it for $40?

If they sell 1,000,000 copies at $400, they make $400 million. If they sell 100 million copies at $40 each, they make $4 billion.

I can't prove that MS would sell 100 times the copies at that lower price. But I doubt it cost them $4 billion to produce it.

In essence, I think part of the reason software is pirated as much as it is (regardless of whether you use the BSAs numbers or someone else's), is because of the price. The HK reference above would seem to support that.

Which begs the question: How do these companies determine the MSRP for their software products? And also: Why do they price them so high that the average user cannot afford them even if they use them at work?

Re:

The point of piracy WAS to not have to pay anything, even if the product wasn't that expensive. Some MOVIES on DVD are $10 or less, but people still pirate them. Price is not the issue, the issue is the piracey.

Prices are risen because of piracey in that the software companies lose money because less people buy their software. If piracey was stopped, or lessened, software prices would soon come down.

A Detailed Explanation Of How The BSA Misleads With Piracy Stats

Yes software thieves might find options other than purchasing that software, so it might not be considered a full sale lost, but the direct costs are lost and lost profit is certainly a lost opportunity cost. The thieves might steal yet another company's software instead if they thought they had to pay. What difference does it make? Losses are real and felt.

While, yes, the thieves might become so enamored with stolen software that they might elect to buy it later, but reconsider their burden on support resources, presumably stolen too. Stolen software will also lead to increased security costs, from shrink-wrap to lowJack. Government resources brought to fight the crime could be put to better use, and must also be considered a cost to the company and to all of us in increased taxes. Nit pick all you want but when someone steals an item or an idea to use it or not, it is equitable to put that loss on the books. Under just what ethical paradigm can theft be no big deal?

Severe criminal penalties for attempting to copyright or patent ideas not your own should be instituted. Otherwise this is all just a game for con artists like you who think that companies making profits in their lawful businesses can somehow be considered obscene.

Re: A Detailed Explanation Of How The BSA Misleads With Piracy Stats

It's amazing that you took the time to write that, but didn't address a single one of the points in the article. I didn't see the argument that "the thieves might become so enamored with stolen software that they might elect to buy it later" anywhere.

What I did see was a counterpoint to the BSA's argument that everyone who pirates a copy of a program would buy said program at retail if the pirate version was unavailable. I saw clarification of why the BSA's stats were inflated with multiple bogus counting of the same dollar. I saw extremely valid reasoning, acknowledged by Microsoft among others, of how pirated software can be beneficial in unexpected ways.

If you read this, please feel free to actually address these points in the article instead of a strawman you thought you saw. it's easy - Mike's list is numbered. Just write which numbers you disagree with and why.

Re: Re: A Detailed Explanation Of How The BSA Misleads With Piracy Stats

Points 1 - 6 are criticisms of the methodology employed, but try as I may I can find no reference to any counter study that attempts to articulate what is believed to be a more accurate assessment of the financials associated with "piracy" (I place the word in quotes because it means so many different things to so many different people). An argument without any attempt to provide an alternate data set is just that...an argument.

Point 7 is once again advocacy of an "release infinite goods and make your money on scarce goods" business model. If "old" models are wanting, then effective advocacy would involve at least some attempt, however modest, to provide some idea of a "new" model that may hold promise for those following "old" models. What may possibly work for the entertainment industry does not necessarily carry over into other industries such as software.

Re: Re: Re: A Detailed Explanation Of How The BSA Misleads With Piracy Stats

So, again, you're falling back on old arguments because you don't like certain ideas advocated by some people here. Given the fact that you've ignored many great points above and even tried to dismiss the existence of fair use doctrines, this shouldn't surprise me.

Let's go through these again:

Yes, points 1-6 are criticisms of the methodology. That's the point of the article you're supposedly discussing. The point that Mike's trying to make is not that piracy is justified or even right. The fact is that piracy is nowhere near the problem that the BSA is trying to make out. This is important because clueless lawyers such as yourself are attempting to push through laws and instigate new powers for the BSA based on these false figures.

Since they're falsely exaggerated, the freedoms removed by the attempted laws will do little to curb the real problems. Point 7 is, again, not hypothetical. It's a proven business model that companies such as Red Hat, IBM, MySQL and Sun Microsystems are depending on, either in whole or in part. Explain to me how that's not a valid point?

Re: Re: Re: A Detailed Explanation Of How The BSA Misleads With Piracy Stats

With repsect to your point 7, just what is it that "morally" (your view) compels anyone to point out to a business just why a new business model may apply to them?

By your own thinking, or at least semi muddled statements then the victims of automation in the late 50s to the early 80s should be compensated for a technological change no one could see coming before hand.

As well, those who find themselves financially pinched by what the Internet both the Web and other protocols who lack the political friends of the RIAA, MPAA and, parts of the software industry do ought also to be compensated somehow or at least directed into something better modelled just for them by benevolent consultants who, presumably, won't charge them a cent. (Of course that's assuming said advice is worth a penny.)

All of which also tells me that you think that those whose lives were inalterably changed with the arrival of the Industrial Revolution ought to have been offered a hand by some late 18th century consultants, had they existed.

Let's put it this way, MLS, and perhaps you'll even understand.

If your current business model doesn't work for you even after gaming laws and making friends in high places then perhaps its time to find something else to do or find a new business model.

You still seem to equate mercantilism with capitalism when the latter works best with minimal support from government, friendly or hostile and the former requires such "friendly" support to continue to exist.

And when you talk about the software industry you seem to take it for granted that there is only one company that matters no matter how often you say you're not shilling for them.

Re: Re: Re: Re: A Detailed Explanation Of How The BSA Misleads With Piracy Stats

Just a guess, but it appears you do not oversee the running of a software company. As I noted in a post above some companies deal with products that lend themselves to what is advocated by MM (Redhat, for example). Some are not. Their products do not lend themselves to the models noted here. My question (and at no time has it ever been stated as being a morality issue) is are there examples that might be a "fit" for such companies. Thus far what I hear is "not my problem". Of course it is not. Even so, at least some information would be helpful to try and get even a modest idea of other options.

"Yes, but if you are merely going to ignore those examples when we give them, then clearly you are not merely asking for a modest idea."

Not ignoring anything at all. However, companies like Redhat deal with products and services that are in many relevant respects significantly different from those to which your models are applied. Hence, mine was just a simple question (and by no means a setup to blast you later) to try and get a brief understanding of other approaches that might work better for companies such as Adobe, AutoDesk, etc.

1. You're trying to derail the discussion and take it completely off-topic. The point Mike's post was simple: the BSA are inflating stats to make it appear that piracy is a much worse problem than it really is. That's it. Yet, you refuse to state which of the points made (if any) you disagree with. Stop with the red herrings, and answer the points at hand.

2. You're the one claiming that there's no alternatives that are workable. In one response to me above, you even claimed that the Red Hat business model is feasible for the music industry and not the software industry, despite Red Hat's obvious success (and you claimed the exact opposite in a previous thread a few weeks ago).

Let's try this again - Red Hat's business model is based on selling updates, support and service for their software rather than selling the code itself. Why is this not a feasible business model for AutoDesk?

As for Adobe, they're way ahead of you. They have a diverse enough product range so that they can make a profit even if one customer sector completely collapses. Much of their success has been made by giving away programs (Flash Player, Acrobat Reader) then selling additional programs to take advantage of those. They are currently diversifying into web-based programs (the web-based Photoshop, their new Air platform), which are not directly piratable.

Not ignoring anything at all. However, companies like Redhat deal with products and services that are in many relevant respects significantly different from those to which your models are applied. Hence, mine was just a simple question (and by no means a setup to blast you later) to try and get a brief understanding of other approaches that might work better for companies such as Adobe, AutoDesk, etc.

Um. No. We weren't talking about Redhat. In a previous comment thread, you asked about companies like Adobe and Autodesk, and I gave a response.

You ignored it.

So, I'm not exactly sure what you think you're accomplishing here. And, I'll note that you fail to explain why you think a company like Autodesk is exempt from fundamental economics.

I have read your responses to my posts, but have not found an answer directed to the question I asked.

"So, I'm not exactly sure what you think you're accomplishing here. And, I'll note that you fail to explain why you think a company like Autodesk is exempt from fundamental economics."

Companies that develop and sell digital goods, so it seems to me, are different from companies like Redhat, which you have noted largely derives its revenue from the sale of services. Since I also believe that companies developing and selling digital goods largely derive revenue from its sales of such goods, I am trying to get a handle on what models might work for them. For example, if companies like Adobe, AutoDesk, etc. consulted with you, how might you advise them about restructuring their business models?

Again, this is not in any way intended to articulate positions such as AD. Mine is much more straightforward and meant to be an attempt to solicit information that I believe could be quite useful when I meet with companies faced with the infinite/scarce dichotomy.

I have read your responses to my posts, but have not found an answer directed to the question I asked.

Which question did I not answer. You specifically asked about business models for CAD/CAM software, and I gave you some potential business models.

And now you claim that we have not.

Companies that develop and sell digital goods, so it seems to me, are different from companies like Redhat, which you have noted largely derives its revenue from the sale of services.

Wow. You are defining the company by their business model, when we are pointing out how those business models are unsustainable, and showing examples of companies in similar *businesses* who are using different business models, and your response is those don't count because the business model is different.

This is like an old comedy routine.

We're explaining how these companies can have new business models, because the old ones will have trouble surviving, and your response is "But... but... how can they survive with the current business model?"

I'm sorry, but you may never get an answer to that question, because the real answer is: they can't survive with that business model long term.

And, again, you haven't shown why you believe some companies do not have to deal with basic economics.

public IP rights

Unless all IP/copyright owners grown up with monkeys in the jungle, everyting they do is derivative work from public knowledge. Now if all human knowledge would be under IP like some dream about, how much should be charged to whipe your own ass?

piracy

Well if they want to point fingures at lost tax revinue for a country then think of this. Piracy for music has aloud the creation of MP3 player, increased sales on CD burners and blank CDs, created jobs for programmers and IT proffetionals to suport this pirate community. Then we have the servers and ISPs.

Now for computer software and businesses we have that money saved so these companies can spend the money in better places, like more computers and employees.

The reality though is that probably 95% of the pirates would not purchase the software.

Re: piracy

I cannot afford a BMW so I will just take one off the lot without paying. This should be viewed as a good thing since I will likely have it serviced at a BMW dealer, it will help create brand loyalty so that later I might actually pay for one, and I will share its use with others so that they too might eventually be inclined to buy one when and as their finances permit.

Please spare me the infinite/scarce goods argument. In many regards it is a rationalization by users to convince themselves that what they have done or are doing is somehow noble because economic theory says so.

Try this on for size. If you do not like what a company is doing, then spend your dollars with one of its competitors. That is how the free market is supposed to work.

Re: Re: Re: Re: piracy

Re: Re: Re: Re: Re: piracy

Software are infinite goods. Therefore, it will become nonviable to sell them at a reasonable price. Sell something that is actually scarcity.

Redhat is ahead of you in that they gave their software away but were able to charge for support. They were able to charge high price even though there are many copycats offering redhat products at cheaper prices.

Re: Re: Re: Re: piracy

Actually people should just get an open source alternative (GIMP comes to mind)for free and let those who want to pay for Photoshop go right ahead. Photoshop does have features that Gimp lacks, but for most users it should serve whatever purpose they need it for. Having alternative options to costly commercial software both helps the consumer and encourages companies to improve their product sufficiently that people will voluntarily buy it over the free alternative.

Re: Re: Re: piracy

Re: Re: piracy

Oh, that is fresh. MLS giving us a lesson on how the free market is supposed to work, while defending a government-granted monopoly right that distorts the free market.

Yes, when something does not support your position, like the infinite/scarce good argument, just ignore it. Damn the laws of supply and demand. I don't like them, so I will just close my eyes and they will go away.

Re: Re: Re: piracy

No...just providing a lesson that appears foreign to many who follow this site...you are not supposed to take things without permission. The law of supply/demand, infinite/scarce, tangible/intangible, IP/public domain, are totally irrelevant for understanding this lesson because this lesson pertains to ethics, and not economics.

Re: Re: Re: Re: piracy

Which is why closed source (proprietary) software generally has features and functionality added after an open source version implements it?

The GNU model (especially Ubutu) has come very far. I am a little surprised that Microsoft hasn't come up with any real new, organically created ideas or breakthrough products in the past 20 years. It's all copied or acquired. In many cases, there are better products out there, many that are free. If anyone needs a lesson in ethics, it's the proprietary software manufacturers who lift code from OSS or competing projects, slap a well known name on it, and sell it for a profit.

Re: Re: Re: Re: piracy

just providing a lesson that appears foreign to many who follow this site...you are not supposed to take things without permission.

I don't believe this concept has been the focus of the debate.

The law of supply/demand, infinite/scarce, tangible/intangible, IP/public domain, are totally irrelevant for understanding this lesson because this lesson pertains to ethics, and not economics.

Actually, I believe the opposite. In the 1990s legal departments ran amok within US Business world, quite possibly starting with that woman who sued McDonalds for hot coffee. Please note: this comment is not specific to that one case, but consider the ramifications: A business worth it's beans has to ask "If a company can be sued for hot coffee, what else is no longer sacred?"

The last two to three decades, American Business has run without input from an economist perspective, which has created restrictions, some interesting caselaw in multiple areas of industry where customers have this idea that they need to be cottled every step of the way. This seems to be the underlying theme of the 1980s and 1990s.

The higher-level focus should be on the very real movement of manufacturing, and service industry jobs going to countries without a mature legal system, as it makes sense for business to consider these alternatives as viable sources of labor, due to lack of legal and litigation caselaw. This crutch makes the US more difficult to compete in the world market.

Within the context of this story, our next president (preferably with a background in economic theory) will have to address quickly- If a law doesn't promote production, is it a useful law?

Re: Re: piracy

I cannot afford a BMW so I will just take one off the lot without paying.

That's a very misleading but characteristic comparison. In that case the dealer is missing the car. That's not the case with copying something. In the case of real theft of the car, the dealer can probably even file a theft report with the police and make a claim under his theft insurance because the car is "gone". If he were to try making the same theft claims because he thought someone had merely made an unauthorized copy of the car I suspect he would be arrested for filing a false police report and insurance fraud as soon as they discovered that he still had the car.

Please spare me the infinite/scarce goods argument.

Gladly. You just reject reality and substitute your own anyway.

Try this on for size. If you do not like what a company is doing, then spend your dollars with one of its competitors. That is how the free market is supposed to work.

Ha, that's funny! That's exactly what people are doing: spending their money elsewhere. And that is indeed how a free market is supposed to work, not the way the copyright monopolists want it.

Re: Re: piracy

"I cannot afford a BMW so I will just take one off the lot without paying. This should be viewed as a good thing since I will likely have it serviced at a BMW dealer, it will help create brand loyalty so that later I might actually pay for one, and I will share its use with others so that they too might eventually be inclined to buy one when and as their finances permit."

1. Your argument is ludicrious and always has been though it's often used by defenders of the current IP mess that those who complain the most have, directly, created. First off, if you can't afford a BMW, you can't afford to have it serviced and it's hard to lend something to a friend that you can't make run.

1a. A Beamer is something real and can be seen, touched, smelled and ridden in which is, at the end of the day, far more costly than a few cents for a CD or DVD. Not only that it is built on known and open standards, stuff in the public domain as well in a highly competitive industry where choice (remember that word) exits across all price and need points.

2. Neither of the above apply to the software industry, the music industry (as opposed to the musicians who actually create the stuff) or the movie industry. In one case we have a virtual monopoly in the other two we have cartels.

"Try this on for size. If you do not like what a company is doing, then spend your dollars with one of its competitors. That is how the free market is supposed to work."

3. In the case of the industries noted in point 2 a free market doesn't, by definition of the term, exist whereas in points 1 and 1a a vibrant free market does exist.

4. Your ideas about simple economics, societies and history are really really horrible. I just hope your legal knowledge is marginally better. I suspect it is because you really have to work hard to be that bad at those three.

Re: Re: Re: piracy

"1. Your argument is ludicrious and always has been though it's often used by defenders of the current IP mess that those who complain the most have, directly, created. First off, if you can't afford a BMW, you can't afford to have it serviced and it's hard to lend something to a friend that you can't make run."

You seem prone to making assumptions.

"1a. A Beamer is something real and can be seen, touched, smelled and ridden in which is, at the end of the day, far more costly than a few cents for a CD or DVD. Not only that it is built on known and open standards, stuff in the public domain as well in a highly competitive industry where choice (remember that word) exits across all price and need points."

A BMW is real, just like a CD/DVD. Based on your authority I am going over to eBay and buy myself a book on how to build a BMW given they are built with open standards and public domain stuff. Sure hope no trade secrets are involved...that would be a bummer.

"2. Neither of the above apply to the software industry, the music industry (as opposed to the musicians who actually create the stuff) or the movie industry. In one case we have a virtual monopoly in the other two we have cartels."

What is a virtual monopoly?

"3. In the case of the industries noted in point 2 a free market doesn't, by definition of the term, exist whereas in points 1 and 1a a vibrant free market does exist."

You are correct. Free markets (other than in situations such as open source) do not exist. Instead, the companies would appreciate being paid for their efforts. That does not strike me as being unreasonable.

"4. Your ideas about simple economics, societies and history are really really horrible. I just hope your legal knowledge is marginally better. I suspect it is because you really have to work hard to be that bad at those three."

Personal insults are always appreciated...they add so much to a discussion and engender a genuine camaraderie among participants.

When the dust all settles I take it that you abhor patents, disapprove of copyrights, think people who deal in digital goods are out of touch with economic reality, dislike big business, especially those involved in the entertainment industry, and believe that everything ever conceived/created by man (and woman) should be unrestricted in any form so that everyone can light their tapers.

Not that I subscribe to it, but a reality check is in order. No matter what economic theory may say (and, yes, MM makes very good points), our legal and legislative system is chugging along a path that is 180 out from what you proffer. Good, bad or indifferent, intangible rights are being further strengthened, made more criminal, being exported internationally, etc.

If you want to pick a fight, do not do it with me because I am not one who is advocating any of the above. Pick it with Congress and the lobbying groups who are working in concert to make our laws even more draconian than they currently are.

Re: Re: Re: Re: Re: piracy

Re: Re: piracy

"I cannot afford a BMW so I will just take one off the lot without paying."

"Please spare me the infinite/scarce goods argument. In many regards it is a rationalization by users to convince themselves that what they have done or are doing is somehow noble because economic theory says so."

You can not equate theft of software with theft of an automobile, however you want to characterize it. Very simply, after a copy of software was "stolen", the original still exists, whereas after the theft of a car, the owner has to walk or take a bus. This is not some economic theory - this is simple fact. No one will ever take anything you say seriously if you try to equate the two acts as being the same. However, once you accept there is a substantial difference in the two acts, you may go on to formulate some argument against piracy if you so choose, and I for one may listen.

Re: Re: Re: piracy

My point was not to equate the two as form, fit, function equivalents. Of course they are not. Both do share, however, one trait. The manufacturers would like to be paid for their products. If taking an auto and not paying for it is wrong, then why would taking "non-freeware" software be any different? Economic models are fine for crafting a business plan, but taking something that is not yours to take without permission is plainly wrong.

Re: Re: Re: Re: piracy by MLS

"My point was not to equate the two as form, fit, function equivalents. Of course they are not. Both do share, however, one trait. The manufacturers would like to be paid for their products. If taking an auto and not paying for it is wrong, then why would taking "non-freeware" software be any different? Economic models are fine for crafting a business plan, but taking something that is not yours to take without permission is plainly wrong."

You come to the conclusion that "taking something that is not yours to take without permission is plainly wrong." I can't see a problem with that statement alone. The only problem I see is that you still resist differentiating the theft of, say, a car and the theft of a copy of software, and I think this goes to the heart of the entire debate.

For example, if you would consider 2 or 3 years in jail just punishment for a car thief, would you give exactly the same punishment to a software thief? Who has done the greater harm in your opinion? Then would you consider degrees of harm perhaps? For example, would you differentiate between someone who steals AutoCad, cracks it so he can sell it on the internet, and somebody who buys a copy of pirated software? ...and if you might be happy treating that dealer in cracked software as you would a car thief, would you also give the buyer the same amount of jail time? Then if you would put the buyer of pirated AutoCad in jail, would you also put the user of some less expensive pirated software in jail? ...and then, if you are going to put him in jail, how about someone who uses pirated music - another form of software? Jail time - or maybe you would consider a great big fine?

Now I don't really expect answers. These questions are rhetorical. The whole point is that when you examine the issues more closely, it becomes suddenly horribly complex. No more black and white!

Then you have powerful lobbies like the RIAA or the BSA manipulating our governments to prioritize software theft to the point that it becomes all out of proportion. For example, there was a news item the other day about national governments getting together to see how they can fight against software piracy. On the surface, what's wrong with that? Well, it is ridiculous that they can manage to work together on this "problem", but don't seem to be able to do a thing about bot-nets stealing billions upon billions of dollars from our economies. Why can't they spend the same level of energy on that? Because there is no powerful lobby organization in the latter case.

I just want to say in the end, that I may have seen things in black and white as it seems you do only a few years ago. Since then I have read endless discussions on the topic on sites such as Slashdot and Groklaw, and now I don't have any quick answers - maybe no answers at all - perhaps only questions.

Re: Re: Re: Re: piracy

Again, and this point has been clarified many times, the two things are nothing alike.

If someone steals a car, there are both physical losses and concrete, tangible losses in other areas. The owner of the car loses their form of transport, which causes time and money to be lost while they either make do without the car or replace it. Since the physical object is no longer available, either the owner or the insurance company take a financial blow when they replace the car. The owner also loses the resale value of the car, and possibly has their insurance costs raised.

If someone copies a program, nobody loses anything tangible. The program is still available for the software company to sell. The only thing that's been lost is the *potential* to make a sale, and even that assumes that the person using the pirated copy will never buy the program (many do). In order to consider a pirate copy of a $50 program as a $50 loss, you have to assume that not only would the pirate have bought a copy of the program if they didn't copy it, but that they would also have bought it at full price. So, it becomes a question of morality, and morality alone, which is something that's impossible to effectively legislate.

This is an invalid comparison you're making. What we're saying here is simple - if piracy is such a hazard to your business model, maybe your business model is wrong. There are literally thousands of companies making a living on business models that are not affected by piracy. The point we're making is that instead of trying to game the legal system with false information to protect your business model, perhaps you need to change the model instead.

Just because you don't like the alternative models that are put forward, that doesn't mean they're not workable.

What is mine is mine

All this talk of piracy should be aimed at those who take a product, reproduce it many times over, and SELL it (usually at a VERY reduced price, i.e., the HK reference) to a great number of buyers (those who who couldn't afford to have the product in the first place because of the inordinate cost) to profit greatly - THAT is piracy, not me selling or giving away a piece of software I don't want or need anymore to someone who might have a need for it, but can't afford a full-priced version. If I buy a product, say new and from an authorized retailer, then by God, I OWN IT! PERIOD! From that point on, I will do whatever I wish with it, i.e., give it away, or resell it to someone who wants it. The analogy being that if I buy a car...I OWN IT! I can do whatever I want with it - resell it, reshape it, modify it, etc., etc. Can you image what would happen to 'potential sales' if a car manufacturer made that kind of onerous stipulation to a potential car buyer!? This concept of NOT owning something you've paid for sickens me to no end. It simply makes me despise the very company(s) that attempt to control something that I've paid for. In the future, should these pinheads like the BSA/MPAA and the rest, feel the need to cornhole the single, end user...they should keep in the forefront of their narrow, little brains that it is they who are creating an atmosphere of hatred towards the very companies they represent 'out of concern for their losses' (which, as we all know, isn't the truth, because they wouldn't be in the business they're in if they weren't getting paid to do what is, essentially, thuggery and good 'ol muscle-work for their 'aggrieved and hapless clients.'). Mike has it right - in every aspect. This whining and handwringing over 'lost sales' is bull, pure and simple. You cannot claim to have lost any damn thing on the supposition that there could have been another full-price sale on a product - that is simply is wishful thinking. These companies should be grateful that someone, somewhere, values their product enough to even what to acquire it. Those 'lost sales' would never have happened in the first place because of the stupid-assed prices being charged; therefore, this 'lost sales concept' just doesn't exist.

Tax rate further reduces the impact

Moreover, the final dollar value of the taxes contributed is equal to the tax rate on the revenue dollars that the tech companies are paying to the respective governments. Taxes are an area where a great deal of company resources are spent REDUCING the tax burden to a given company. So, ultimately, perhaps 2% of that original revenue dollar is actually going to the government.

As you noted however, the equation isn't necessarily equal on the revenue to the member companies compared to revenue in those stolen copies, so that further reduces the 2% to effectively nothing.

And you are exactly right in that much of the software stolen was from folks who could not afford (or WOULD not afford to pay if they had to pay full price). You might happily want to charge someone in a 3rd world country a $400 price for Vista ultimate but it is very unlikely they would pay that, or any price at all for Vista since they likely see very few hundreds of $ for tech at all, if they even see that much money.

Moreover, many who steal, as you point out, later in life become people of means who buy the later generations of that same software that they "got used to" on stolen copies earlier in life. If you forced them to, say, an open source software that early on in life, who's to say they would reject being a customer later in favor of that "other" software they are then more familiar with 10 years later?

Just another tech organization trying to make itself more important than it actually is. Is it good to try to stop piracy? Sure! Is it going to save the world billions? Nope, sorry.

One can happily acknowledge that piracy is a very bad thing and still be exasperated at the way most of the media allows organisations like the BSA to get away with grotesquely warped use of statistics (to put it mildly).

I've seen many times press articles reporting unquestioningly the similarly silly claims of various organisations about how much they are losing to piracy (they usually conflate piracy, counterfeiting and bootlegging, just for good measure).

Being dishonest even in a good cause is still dishonesty. And the tendency of the media to just rewrite the press releases of parties with vested interests instead of doing proper journalism is not good for democracy.

@MLS
I'm puzzled why you on the one hand take such a sternly moralistic line over piracy (which I also do not approve of) yet seem totally unperturbed by the casual cynicism displayed in the BSA's 'statistics'.

I personally think the BSA's dodgy numbers are themselves a symptom of a problem that is at least as serious as software piracy.

Re:

See my comment in 3 above, which states:

"As for BSA's "rack up" of the numbers and your comments concening the assumptions made, I personally would like to know what analytical method you would use to arrive at what you believe is a more credible number."

Of course most of these organizations overstate numbers. By how much though is impossible to gauge without someone taking a look at them and crafting a more credible figure. Unfortunately, what seems to happen here is to blast a number, but not then follow up with something that is more realistic.

Re: Re:

Mike does mention the triple-counting thing, but you conveniently ignore that because mentioning it would weaken your argument that Mike should produce nothing short of a Ph.D thesis to support his arguments.

You sound like a smart person, so I'll let you in on a little secret: there is no credible figure. Any study on pirating can be easily torn to pieces because any study must rely on assumptions.

The point is that we shouldn't focus on the imaginary cost of piracy, we should focus on make a product more valuable to the end consumer. Well, save and except for you.

The cost of losses? Really?

"For example, the lost tax revenues to state and local governments -- an estimated $1.7 billion -- would have been enough to build 100 middle schools or 10,831 affordable housing units; hire 24,395 experienced police officers; or purchase 6,335 propane-powered transit buses to reduce greenhouse gas emissions."
This is so ludicrous it's not even funny. It's beyond ludicrous and it's beyond sad. Why don't they just come out and say it: "By using pirated software, you're putting your children's lives at risk and making us more vulnerable to terrorism. It's our no-so proven opinion, I mean it's a fact that pirated software supports terrorism. Do you want to support terrorism?"

On a related note, similar figures were presented in a recent documentary movie about the state of the drug wars in the US. If only California legalized and regulated marijuana, they would:
1) Save $1 billion in prosecuting marijuana users and sellers.
2) Take in $1.5 billion in revenue from regulating and taxing the sale of marijuana.

Re: The cost of losses? Really?

Think of "Terrorism" in terms of what it accomplishes:

Terrorism, in a business sense, is just an emotional descriptor for "doing the wrong thing". However, when used, it is typically associated with the visual and emotional impact of 9-11. The business goal is to re-distribute wealth to Fortune 1000 American business, and/or add additional controls to their product which generally limit ownership rights. The public will "trust" those who engage the terrorism line, and be willing to pay additional if it means preventing attacks on the public's emotional psyche such as with 9-11.

DRTFA

Where exactly would the consumer get this extra $11.4 billion? It's not like someone who pirates is paying the blackmarket...
If the consumer is spending $11.4 billion more on software, then they spending about that much less on some other taxable product. In the end, the government isn't getting any extra taxes.

What is mine is mine

Doesn't anyone understand the concept of ownership for the end user? Who are you people, anyway!? Shills for the companies? Piracy IS a 'business model' idiots! THAT is who these numbnuts (insert BSA/MPAA here) should be directing their attention towards! What the end user (read INDIVIDUAL) does with his PAID FOR, privately-owned product is HIS, period! Your arguments make no sense in the context of the individual owner. Once paid, forever owned. THAT'S the concept you idiots need to grasp. These whining, self-promoting assholes (Corporations) need to wake up and realize that the individual who is using their product, whether they bought the damn thing on the black market at a reduced price or at a retailer at a full price, only gives their product legitimacy and longevity. It all boils down to greed - pure and simple. Every argument I've seen here has no relevance to the end user. And, to promulgate the idea that 'lost sales' are hurting the industry - that's rubbish, bullshit from top to bottom. If I want a copy of something I simply can't afford (and you all know how stupidly expensive some crap can be MSRP'd at), because I need it - I WILL OBTAIN IT! The damn software is already out in the marketplace! WAKE UP, AMERICA! Those companies that are crying about lost revenues are going to be the first to go down the toilet because EVERYONE is sick and tired of hearing their whining and moaning about a stupid concept of 'lost sales'! Mike, I give you kudos to exposing the utter ignorance and irrationality of this whole turdbag.
Note: Microsoft and the other software turds, you're going to go down because of this, I guarantee it, and you have no one to blame but yourselves and these idiots you've hired to do your 'muscle work' (BSA/MPAA, et al). Open source, freeware, whatever, will prevail - you just wait and see! Everyone is sick and tired of your whining because someone just happened to acquire a copy of a program you put out on the market, legitimate or not! You need to thank your lucky stars that anyone is even remotely interested in acquiring a piece of your crap!

It seems the courts do not believe that if you buy it, its yours when it comes to the IP world. I'm not sure of the implications this particular case, but it seems that a lot more paid customers may become pirates just to feel like owners. I believe that may be called a mental transaction. To pull this off they just added legalese that no one wants to read, into the damn package that you don't get to read until after the sale is complete (talk about a good business model.. signing the contract AFTER payment is exchanged)

I mean if I have the option to buy an expensive software package and I know that I don't own it, I think I would be more likely to "pirate" a copy just because I would feel like at least I "own" that copy. It's not legal but it feels more "right" to me the consumer.

Let's be fair about this. The IP industry always wants to compare it's infinite goods to scare goods and use terms like theft to describe something that isnt theft. Ok let's turn that around; you buy a car and when you want to sell, you find that you do not own the car, so you have no right to resell it. I think everyone can follow the path. eBay would be destroyed in the blink of an eye. ( Does that fit into the IDC stats? ) RIght of first sale is good for the economy and theres a reason it was established. If you can put an EULA on IP you can put one on Physical Property as well, that doesnt make it a good idea.

to free or not to free

"The report counts every unauthorized piece of software as a lost sale."

This may be incorrect, but isn't it also incorrect to assume that every single piece of unauthorized piece of software is NOT a lost sale? The 1.7 billion figure may seem inflated, but nevertheless there is a definite loss to companies and the authorities.

"That's a huge, and obviously incorrect assumption. Many of the folks using the software likely would not have paid for it otherwise, or would have used cheaper or open source options instead."

Linux and Open Office are viable (and some may say better) open source options to Windows software. Yet, Microsoft products are the biggest targets of software piracy. How do you explain that?

I think the point about the cheaper option holds the key to solving the problems of the so-called "obsolete" model. Why charge $400 when you can charge $40 and exponentially increase sales volume?
The model won't become obsolete, companies would earn more goodwill, piracy would not be so serious a problem as many people (not all) would rather fork out nominal sums than risk using a pirated version.

"The report makes no effort to count the positive impact of unauthorized use of software in leading to future software sales."

On one hand you say software should be free, and here you say piracy has a positive effect on future software sales. Should software be sold or given away free, Mike? If it's the latter, then how are you justified in defending piracy because it increases future sales?

"But what they don't acknowledge is the ripple effects in the other direction. That is, if (going by their assumption, remember) every company that uses an unauthorized copy of software had to pay for it, that would represent $11.4 billion in money that all of those other companies could not use to fund jobs at those companies. What about all of those jobs?"

This is a tricky question, especially if you are a software vendor. Which is better: 10 companies paying you $10,000 each for your software or 10 companies creating 1,000 jobs but not paying you for using your software?

"That's because the use of software within industries is a productivity tool that increases overall productivity and output, which would increase taxes beyond just the income taxes of the employees."

The use of software may increase productivity and output, but what about the company that spent a lot of money and time to create that software in the first place? Oh...I forgot, they should have reengineered their "obsolete" model.

"Worst of all, the report seems to assume that direct software sales are the only business model for the software industry, ignoring plenty of evidence from companies that have adopted business models that embrace free software -- generating billions of dollars for the economy (and in taxes)."

Where is the need for the survey to address business models that are not affected by piracy? This is typical of you: I say "A is bad," you say "but B is good."

The purpose of such surveys will be defeated if they end up stating: Too bad folks, fighting piracy is simply too huge a task, start giving away software if you wanna survuve. The victim wants to create greater awareness of the crime, but you are asking him to stop complaining about it. Are you sayng piracy is really not a problem at all, and that companies and the public should simply ignore it?

"And that's what this really comes down to. It's a business model issue. If others started adopting these business models as well, there wouldn't be any "losses" at all."

Of course. If only companies like Microsoft and Oracle shed their stupid notions of making money from software sales and gave them awaty free, they would be able to make a lot more money than ever before in the history of mankind. Can't believe they still haven't seen the light.

Re: to free or not to free

"Yet, Microsoft products are the biggest targets of software piracy. How do you explain that?"

Easy. Most end users are idiots. They know only what they've been told to use and never look at alternatives unless they have to - for example, there's a lot of people who still associate Internet Explorer's blue 'e' with the internet and are unaware there's alternatives. So, when they get hold of a pirate copy (usually through a "friend who knows about these things"), it's of the program they're used to (Windows, MS Office, Photoshop, etc.).

However, if you were to force them to buy the software, they'd still balk at the price tag. They'd be more willing to replace their MS Office with OpenOffice when one is $300 and one is $0, than they are when the software is pirated and both are effectively $0 to them.

"Where is the need for the survey to address business models that are not affected by piracy?"

Why a survey? The bottom line is there are numerous business models, and it's the proprietary, closed source model where people are complaining of losses due to piracy. There are many companies who have built robust businesses that are immune to piracy, as the business does not depend on keeping the source code secret and the executable restricted. Why is it a problem to point this out and suggest that a different model might be more feasible?

"If only companies like Microsoft and Oracle shed their stupid notions of making money from software sales and gave them awaty free, they would be able to make a lot more money than ever before in the history of mankind."

Your sarcasm is misplaced. Microsoft and Oracle have made their fortunes specifically because they locked people into their proprietary systems, then charged the Earth for the privilege of using them. That needs to change, and it slowly is, piracy or no piracy.

Really?

Wow, the sad part is the politicians that review this don't consider the other side. I believe this was a very good write-up and if any laws were being made, I would really like for people to have THIS article in hand as well.
Just having the statistics, as you pointed out, is seriously misleading.
A quick random note, if you give software away for free, people automatically assign it lesser value than the paid alternative.
In the case of Microsoft, if you pay for Windows, then in the mind of consumers, it is better.
Having Windows for free would, in the mind of the consumer, diminish it's value.

free

"Yet, Microsoft products are the biggest targets of software piracy. How do you explain that?

Easy. Most end users are idiots."

But does that excuse them of such criminal behavior or lessen the magnitude of the problem?

"They know only what they've been told to use and never look at alternatives unless they have to - for example, there's a lot of people who still associate Internet Explorer's blue 'e' with the internet and are unaware there's alternatives. So, when they get hold of a pirate copy (usually through a "friend who knows about these things"), it's of the program they're used to (Windows, MS Office, Photoshop, etc.)."

That's because most software users are ordinary people who need to use a computer, not computer savvy geeks. This is where the proprietary model succeeds, and fails.
Most people don't want the hassle of hunting for open source when the vast majority of the world uses a standard. But they don't want to pay a bomb either. Result: companies lose.

"However, if you were to force them to buy the software, they'd still balk at the price tag. They'd be more willing to replace their MS Office with OpenOffice when one is $300 and one is $0, than they are when the software is pirated and both are effectively $0 to them."

But they would be a lot more willing to pay $30 for Windows than take Linux for free. That's why I think it's a pricing problem and not a business model problem. The model is not obsolete just because open source works or because the Red Hat model is successful. Nor can the free model work for all software (SAP, Galileo come to mind immediately).

"Where is the need for the survey to address business models that are not affected by piracy?"

"Why a survey? The bottom line is there are numerous business models, and it's the proprietary, closed source model where people are complaining of losses due to piracy."

Obviously they are complaining because they are the affected party. Why does that rile? Unauthorized copying of software is illegal. These companies are complaining about that. Why is that a problem with you guys?

They haven't decided to give away their software free of cost. They firmly believe in their model as much as open source proponents do in theirs. To say their model is doomed is one thing; to say they shouldn't complain about a clear and real problem is quite another. And Mike even decries their seeking the government's help. Who else do you turn to if you have to counter what is clearly criminal behavior?

"There are many companies who have built robust businesses that are immune to piracy, as the business does not depend on keeping the source code secret and the executable restricted."

No one's disputing that. But there are also many robust businesses built around the proprietary model. You may decry their model, but how can you justify unauthorized usage of their software? Why is that so difficult to understand?

"Why is it a problem to point this out and suggest that a different model might be more feasible?"

They are complaining of a problem and all you can do is to ask them to stop complaining. And offer a solution that suits your ideology, not their business model.
Hell, if giving away software solves the problem why even bother with piracy? Because these companies don't want to give away their software. And adopting the free model will not work for many of them. What will work, is better pricing.

If the model is more feasible, why would they not accept it? Does it make business sense to give away a piece of software when people are willing to pay for it?

"If only companies like Microsoft and Oracle shed their stupid notions of making money from software sales and gave them awaty free, they would be able to make a lot more money than ever before in the history of mankind.

Your sarcasm is misplaced. Microsoft and Oracle have made their fortunes specifically because they locked people into their proprietary systems, then charged the Earth for the privilege of using them. That needs to change, and it slowly is, piracy or no piracy."

Perhaps you realize that people will pay for software even if there's a free, open source option. Free and open source is here to stay, no doubt, but it's not about to take over all realms of the software space.

Re: free

OK, you seem to be arguing with me on points I'm agreeing with you on. I agree that piracy should be reduced as much as possible (I'm not naive enough to think it can ever be eradicated). I also agree that the pricing of products, especially "business" titles like Office, Photoshop, Dreamweaver, AutoCAD et al is a major part of their problem.

I don't think that open source will ever completely replace proprietary solutions, but organisations like the BSA need to realise that there are other, more pressing, issues to deal with.

"No one's disputing that. But there are also many robust businesses built around the proprietary model. You may decry their model, but how can you justify unauthorized usage of their software? Why is that so difficult to understand?"

I understand that, but you have to understand the argument being made here. At the moment, there are 2 major types of model - the proprietary model and the open source model. The proprietary model is failing, and rather than try to adjust their business accordingly, they're leveraging organisations like the BSA to try and control the market in their favour.

The argument is that limiting the market, especially based on falsely exaggerated data, is not the way to go. Again, read the thread. I've not made any statements to suggest that I "justify unauthorized usage of their software". I'm simply annoyed that the BSA is trying to control both the law and the marketplace based on falsely inflated figures. If piracy is such a massive problem, fight it based on the facts. If the facts don't support the actions they want to take, they're the wrong actions.

"Perhaps you realize that people will pay for software even if there's a free, open source option. Free and open source is here to stay, no doubt, but it's not about to take over all realms of the software space."

Again, yes, I realise that. What companies like Microsoft need to realise is that the market is diversifying. 10 years ago, their underhanded tactics had all but killed their only real competitor in the Office market (Wordperfect) and they had no real competitors in the OS space. Now, they have major competitors in both markets. They are stuggling to maintain the lock-in tactics they used previously (OOXML is struggling as an acceptable standard) or force people to upgrade (many people are avoiding Vista like the plague).

It's unlikely that Microsoft and their peers will ever disappear, but it's not just piracy that's causing their problems.

May not be that bad...

If indeed when i buy a cd, i'm buying a license to listen to a particular song, or group of songs, then when that song, or group of songs, comes out in a different format than the one i purchased it on, it wont be piracy when I download it? I think i like that idea. Even better, if my disk gets scratched, and I need a new one, will the send me a new one? Kinda like my modem that I'm renting from my isp, or a rental car that stops running? May not be so bad if thats the case, but I'll bet its not.

Re: "free" business model.

I know it can be lonely in blog-land without responses, so let me mention a difficulty with your proposal.

Many companies are using free "teasers" (low res image, low bit rate music, etc.) to entice people to buy the top-end product. The problem, however, is that in many cases the minute someone gets the top-end product it appears almost instantaneously on the net where it can be downloaded for free. Just recently I purchased a rather expensive plugin for Photoshop the very same day it was released. Not more than 10 minutes later I saw that the plugin was on a site in Russia where it could be downloaded for free (fosi.ural.net...which is a straight RAR file download site).

What is a software company like Adobe, Scansoft, OnOne, Nik, Acronis, Webroot, etc., etc. to do? Web-based versions are not a viable option for many customers, there are no real sevices to sell, etc.

Re: Re: "free" business model.

MLS, I just copied your comment...did you feel the pain? Did you notice the loss of Shill Income-Stream? I just copied your "my own personal morals should be adhered to by all" argument...did it directly impact you? Looks like you still have the same amount of shilling(s). See, it doesn't hurt anything except for your EXPECTED return. You're not making as much as you'd like for your product (which I think you should know...is not worth what you're asking for it).

Re: Re: Re: "free" business model.

Re: Re:

Just recently I purchased a rather expensive plugin for Photoshop the very same day it was released. Not more than 10 minutes later I saw that the plugin was on a site in Russia where it could be downloaded for free (fosi.ural.net...which is a straight RAR file download site).

So just what was MLS doing trolling a site like that? Oh I know, "research", right? That reminds me of the people who get caught with kiddy porn and then claim that it was just for "research". What a hypocrite.

Re: Re: Re:

No, I knew the people in the company, noted a "hit" in a Google search, and then took a look to see what was at the linked site. I got back to tell them that every one of their products were available for download at that site.

Re: Re: Re: Re: Re: Re:

What information? Here are some things you need to know if you sell any kind of digital product:

1. Everything will be pirated, regardless of "protections" you apply to it.

2. A pirate copy will be available on the day of release, or most likely before that date.

That's it. These are not negotiable nor preventable in an Internet age. Any company not aware of these facts is not aware of their own business environment. The trick is to build your business around these facts. If people are pirating your product, that at least means people are aware of it. Use that to leverage other products, services, or to introduce incentives for buying the legit copy.

Oh, and:

Just recently I purchased a rather expensive plugin for Photoshop the very same day it was released

I emphasised the part of your comment that gives a clue as to why it was pirated. If something is truly expensive (i.e. sold for much more than its intrinsic value), then of course it'll be pirated!

Re: Re: "free" business model.

...which is why a company is foolish to depend on selling the code alone. there are many great examples, you just choose to ignore them in favour of those that this your predetermined assumptions.

Even then, your examples of companies are pretty poor. Adobe is moving into the web-based tools market, and they are promoting a web-based solution for others to do so (Air). So, they've diversified their company enough so that if everyone pirates Photoshop and Dreamweaver, they still have a way to make a profit.

Scansoft? Well, if anyone uses their products that much to begin with, it's a good sign as most of their products are knock-off of other companies' anyway (PDF converter = Adobe Acrobat, Dragon = ViaVoice, etc.). Webroot sell security software that requires a subscription to get updates, so piracy isn't that big an issue, etc.

I notice you don't mention any of the companies working on different business models in competition with the ones you do (e.g. AVG/Grisoft vs Webroot, Comodo vs Acronis, etc.). Let's take AVG as the great example here. Grisoft give away a FULL version of their anti-virus software. Not "low res" or "trial", but a full version. It's officially licenced for home users only, but I have no doubt that some business users are using it illegally. Why do Grisoft do this? They have numerous other security and anti-virus products and they use the free version to sell these. They don't lose out because their business model is based on selling the security updates, not the code itself. You can pirate the business version if you want, but it'll be useless in a month due to the lack of updates.

"free" business model

Largely to MLS:
It may be true that buyable software appears on Russian networks seconds after it is has been purchased by one person. However, the same is true of music files. Yet, despite that, billions of songs--increasingly without DRM--are purchased by consumers who could be downloading them for free. Why is that? Apple, Amazon, eMusic, etc are obviously offering something that resonates with consumers. There are clearly several different tiers of potential consumers and they are not equal. Some, however "moral" or "immoral" may likely never purchase another piece of information again. However, many consumers are willing to pay for goods and services that are packaged in compelling ways. The ECONOMICS, not ethics, question is whether the costs required to stamp out the former group (in terms of money, diverted governmental energies, increasingly burdensome legislation, more litigious environment) are worth it, or whether those resources might be better applied to marketing compelling products and services to the (probably much larger) latter group. That is, maybe it's time to write-off the "pirate" group and focus capital where its ROI will be better.

Piracy analysis

Well done.
Like most stats, I find these numbers very frustrating. Family, friends and business colleagues often quote them to me to justify how bad the Internet is. Problem is, no one takes the time to actually understand the numbers. They assume that organizations like the BSA will 'do the right thing'. Of course the 'right thing' depends on who you are and your objectives.

Stealing is wrong; lobbying is unethical

Simple answers, Mike does offer solutions for individual businesses, tailored to their situation, his company charges you for that individual attention. It costs the techdirt insight community time (finite resource) to create a solution for an individual company.

The article here is not trying to justify copyright infringement, it is pointing out that there are problems with the method used to create the study (including basing their numbers on hardware sold/ liscences that could be put on that hardware)

Most people feel that they are doing something wrong when they use pirated or even free software, and so many people will feel more comfortable using a reasonably priced pay software. But if they cannot find a Reasonably Priced version to open that attachment sent from their relative they WILL find a free alternative, pirated or not.

Does this constitute a lost sale? NO. No-one will pay $400 to open an email once a week, if piracy magically disappeard open source would flare, not sales. But this is completely unrelated to the article.

Is it morally, ethically, legally, socially, or economically right to bribe, bully, misconstrue facts, lobby, and legally manuever to have your way regardless of the customers/ citizens stance on your business practices?

Re:

Not trying to be an antagonist...just trying to learn about other approaches that may mimic is large degree many of the models discussed here that may with adjustments embrace more of the software industry.

As I have repeatedly noted the BSA figures over clearly overstated. What I would like to know is what is believed to be a more reasonable figure? Legislation is being proposed based upon overstated numbers. It would help the legislative agenda by offering counterpart figures that bring some reality into the discussions. If an industry organization coughs up a large number in the mega-billions, it is hard for a legislator to scope out the problem if the only counter input received is that mega-billions is too high without providing a counterpoint dollar figure.

Right now the Congress, the Executive branch, and particularly the DOJ is hard at work asserting that "IP theft" is a critical matter for our economic security. Even I have obvious concerns, but without contrary data it is invevitable that these even more draconian measures will move forward in the absence of counterpoint data.

The reality is these efforts will continue unless and until someone steps up to the plate and traverses the data upon which Congress is relying.

This is not in my view trolling or shilling. I have represented parties on both sides of the issues raised under current law and do appreciate insight by others that inform me of other ways to approach these issues, not only as a lawyer, but also as a business advisor.

BTW, I have never attempted to equate digital goods manufactures in the software industry with those in other industries. The facts in each case are far too divergent to even attempt such a foolhardy approach.

Whether you choose to believe it or not, my interest lies in learning about divergent views to better understand issues. Important, I do not believe I have ever stated my personal views concerning the propriety/effectivenss of either patents or copyrights. I have endeavored to address some misconceptions about what the laws actually say, but this is a far cry from saying that I am an ardent supporter of those laws.

Unauthorized figure questionable

If I remember rightly, in previous studies, the 'unauthorized' figure came from establishing a baseline usage number for apps, then comparing registered licenses in the sample to the baseline. However, the baseline was derived only from *products of the BSA member vendors*, i.e. MS Office.

That means a sampled company using OpenOffice would not show a registered license for MS Office, and the report would reflect that as "unlicensed", or "unauthorized".

Free software advocates should support Copyright law

Anyone supporting Linux and other GPL works should also support Copyright law. GPL itself depends on Copyright law and if every software user had to pay full market price for their product then the barrier to entry for proprietary software would be high enough to push users toward FOSS.

Remember that every time you convert a person from using a pirated proprietary product to using a GPL or other free product, you are helping to prevent the loss of revenue (and loss of tax money too).

Infinite Copyright terms will indeed destroy a large part of our IP heritage, but this will serve future generations by boosting incentive to build the Creative Commons pool. Eventually, only the Creative Commons will stand the test of time because the proprietary material will eventually hit economic bad times (as must always happen sooner or later) and fall into disuse. Once this happens, the proprietary material has no way to get back again (it's a one way trip). CC material stays in circulation, even without economic incentive.

"Piracy" "Labor Laws" "Society" "Anarchy"

How many of you open pirates, would not complain if your employer refused to give you your paycheck on Friday?
At the end of the day you still have all of your physical parts of being, the only thing you're missing is some of your personal time. Wait, I understand you have a right by law to be paid for your time.
"Ip Law" is just the exact same as "Labor Law" it is an "a right to intangibles" to be paid for your time.
It is based on moral and ethical rights of person, and a need of society. We all recognize that law and statute fulfill the need, for society to derive an outcome that befits society.
Laws are enacted at a rate of need to protect society.
We all pay higher prices everyday at "bricks and mortar" because of "shoplifting", at the credit markets because of "identity theft".........any business that doesn't pass this loss along to the ultimate consumer will soon be out of business. This doesn't even count the cost all of us pay in judicial cost of enforcement of the laws and housing the inmates, each and everyone of us pay.
With out laws, ethics, morals, we wouldn't have a society that functions, we would have Anarchy = a world in which no one would choose to live in.
History confirms all that I have said..."Society of RobinHood" even they had a moral standard. The "Wild Wild West" anarchy was overcome by the rule of law and society prospered, before the rule of law those who lacked morals and ethics prospered to the detriment of society.
Society = we the people.